Actually, one of the reasons I like 50/50 for retirement is because the math is super easy.
If you start the year with $1 million in stocks and $1 million in bonds, and you're pulling $80,000 a year, just collect all the dividends and interest over the year, and sell the side that is higher to get closer back to 50/50. No math required.
If you get $60,000 in interest and dividends over the year, you'll need sell $20,000 worth of investments
If stocks are worth $1.04 million and bonds are worth $1.0 million, you just sell $20,000 from stocks.
If stocks fall to $800,000 and bonds are worth $1 million, you just sell $20,000 from bonds.
Never have to do any math, just sell from the side that is bigger. Each year you move towards 50/50 by selling the higher side.
Call it the "J stands for Jay" principle.![:sharebeer]( "celebrate")
(Edit: Now, if the stock side goes really high, and the AA gets way out of whack (like 60/40 or something), I might actually do a full rebalance back to 50/50 - I won't rebalance the other way - if there's big prolonged stock crash, I'll just be selling from the bond side until stocks recover, or I'm back to 50/50 again)
If you start the year with $1 million in stocks and $1 million in bonds, and you're pulling $80,000 a year, just collect all the dividends and interest over the year, and sell the side that is higher to get closer back to 50/50. No math required.
If you get $60,000 in interest and dividends over the year, you'll need sell $20,000 worth of investments
If stocks are worth $1.04 million and bonds are worth $1.0 million, you just sell $20,000 from stocks.
If stocks fall to $800,000 and bonds are worth $1 million, you just sell $20,000 from bonds.
Never have to do any math, just sell from the side that is bigger. Each year you move towards 50/50 by selling the higher side.
Call it the "J stands for Jay" principle.
(Edit: Now, if the stock side goes really high, and the AA gets way out of whack (like 60/40 or something), I might actually do a full rebalance back to 50/50 - I won't rebalance the other way - if there's big prolonged stock crash, I'll just be selling from the bond side until stocks recover, or I'm back to 50/50 again)
Statistics: Posted by HomerJ — Fri Mar 01, 2024 5:05 pm — Replies 32 — Views 2737